Keep government out of energy marketplace

Over almost the entire course of the Obama presidency, congressional conservatives battled with the administration over the subsidies that were such an important part of renewable energy policy. Critics labeled them distortive of the marketplace, said they had an adverse effect on energy consumption, and put the government in the position of picking winners and losers, something that most definitely was not its job.

Where these critics are now is a mystery, since hardly any are speaking out against an initiative proposed by Energy Secretary Rick Perry. The plan, which could come as soon as this week, would have the U.S. government step in and subsidize a group of coal and nuclear plants their operators claim may soon go bust.

FirstEnergy Solutions, which operates the plants located in the Ohio and Pennsylvania region of the PJM Interconnection (a regional transmission organization coordinating the movement of wholesale electricity in all or parts of 13 states and the District of Columbia) has asked the department to use emergency powers accorded it in the Federal Power Act to provide them with what is effectually an unending subside by awarding so-called "preferential contracts" to keep them in business.

The company may say it's a matter of "grid reliability" and "national security" (as a backup it's also citing emergency authority available under the Defense Production Act) but what it comes down to is having the government force customers to buy electricity from a set of supplies at a higher price before allowing other companies to compete by selling power at a lower price.

Perry knows better. As governor of Texas he did everything he could to facilitate extraordinary growth in the energy production. The fact the U.S. exports as much surplus energy as it does and is projected to be the world export leader in just a few years is due in no small part to the wisdom he showed in getting the government out of the way and letting the private sector do what it does best: innovate, develop new technologies to meet expanding needs, and keep prices and production stable. What FirstEnergy wants, and what he seems inclined to soon approve, goes against all that.

It's true the Obama administration beat the heck out of coal and nuclear for eight years. It wasn't right, it was expensive for the taxpayers and for energy consumers, and it put lots of people out of work. Providing subsidies now won't fix any of that. Unfortunately, the genie is out of the bottle and there's no way to get her back in. What was true under Obama is true now even though the energy production the government is attempting to subsidize (or is being asked to subsidize) is different. The effort to promote wind and solar through subsidies and stimulus didn't work, and taxpayers were left holding the bag. Fool me once, as the saying goes.

At the behest of FirstEnergy Perry is being asked to fool us twice. Writing on the subject for The Heritage Foundation, a leading pro-free market organization based in Washington, policy analyst Katie Tubb described the situation thusly: "Adding more distortions to electricity markets for the sake of a short-term band-aid for coal and nuclear power plants will have long-term negative consequences for customers, technology innovation, and the future of the electricity grid.

"Instead of micromanaging the grid," she continued, "politicians and regulators should be reducing the barriers and distortions that undermine its efficacy." The subsidies FirstEnergy is seeking is one of those distortions which, in his saner moments, Perry would have once rejected out of hand as being anathema to what he believes.

There are ways forward, for FirstEnergy and the entire U.S. energy community that will work for us all. That means giving free reign to competition so that price signals rather than government largess will let the rest of us know what's happening in the market. That's the way to get to grid reliability, not through a scheme based on a phony claim national security is somehow at stake. This waiver is so broad and the logic behind it so tortured it would, if the request is approved, give the U.S. Department of Energy unlimited power to act without restraint in the future. For the good of the country Secretary Perry needs to say "No" to this blatant act of crony capitalism and once again be the hero he was back in Texas.